Despite a squeeze in funding across Africa’s VC spectrum in 2023, climate tech startups were a striking exception, hauling in US$1 billion of the total US$3.5 billion raised as investor interest surged.
Climate tech startups bucked the trend in Africa’s venture capital space, actively notching up an impressive $1 billion amidst a broader funding fall-off in 2023.
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Data tracker, Africa: The Big Deal notes that around 1 in 3 dollars invested into startups on the continent in the forecast period went to climate tech startups.
The strength of the sector according to the Deal, illustrates “both the potential of ‘green’ investments in Africa and the increased focus of investors in this space.”
“While energy and water start-ups took the lion’s share, agtech dominates the early-stage pipeline, also pointing to the need for greater innovation across diversified sectors that will need to adapt to climate impacts.”
Rising investor interest in regional climate tech, mirrors findings from the 2023 Africa Climate Awareness Report, published by bird story agency, which showed a growing preference for cleaner solutions among the populace.
Africans showed a strong inclination towards green solutions such as solar-PV and electric vehicles, which are slowly entering the market, especially in Kenya, Nigeria, South Africa, Egypt and some Maghreb states.
Partech Africa trackers showed that African tech startups hauled in US$3.5B in total funding (equity and debt combined), a 46% dip from the previous year, spread across 547 deals.
Despite a 22% drop in the overall amount raised by the climate tech sector between 2022 and 2023 (falling from US$1.6B to US$1.2B), the sector still managed a modest increase in the number of debt deals – from 71 in 2022 to 74 in 2023.
Part of the sector’s resilience is the availability and diversification of funding sources, such as impact investors, development finance institutions, corporate venture capitalists, and philanthropic organisations keen to support climate tech startups.
The emergence and innovation of new business models and technologies such as pay-as-you-go have also made these startups more bankable, while artificial intelligence and the internet of things have enabled them to scale and reach more customers.
Late last year, several climate tech startups from Africa were featured in the inaugural Google for Startups Accelerator. They offered solutions for energy, agriculture, and transportation using data, AI, and clean energy.
These included NeedEnergy, a Zimbabwean startup that uses data intelligence to provide smart and clean energy solutions and Octavia Carbon, a Kenyan startup that designs, builds and is set to deploy machines that can directly capture CO2 from the atmosphere in the Kenyan Rift.
Others were Seabex, a Tunisian startup that offers an AI-driven sensorless precision irrigation solution that empowers farmers with actionable insights for water-efficient crop growth and SolarTaxi, a Ghanaian startup that provides locally assembled electric vehicles to advance the growth and adoption of sustainable transportation.
Support for climate tech companies in Africa has been growing internationally, too. At COP27, several UN agencies launched a programme to drive new capital flow in climate tech to help African states harness and build renewable energy systems to power their economies.
Climate tech is seen as an important ingredient in fast-tracking Africa’s transition from high-pollution industries to adopting clean sources and promoting an energy transition in line with the 1.5-degree goal.